What is the amount eligible for leave travel allowance tax exemption

What is the amount eligible for leave travel allowance tax exemption


What is Leave travel allowance (LTA)?

Leave travel allowance, as the name itself suggests, is an allowance given by the employer to employee to go on a tour with his family during the service or after the retirement or on termination from service.

  • Leave travel allowance is also referred to as Leave travel concession.
  • This concession is available to both employee and his/her family.
  • Section 10(5) of Income tax act exempts the amount given by the employer as LTA from taxability.
  • Rule 2B (LTA rules) lays down the conditions for LTA exemption from tax.

Expenses covered under Leave travel allowance:

LTA covers only actual travel costs incurred by the employer but It does not cover the lodging, food expense etc.

Travel in India or abroad:

As per LTA rules, Leave travel allowance exemption can be claimed only with regard to travel in INDIA. Travel to abroad is not covered under LTA.

Family means:

For this section, Family includes

  • ·        Spouse.
  • ·        Children.
  • ·        Parents.

·        Brothers and sisters (including dependents)

What is the Amount eligible for Leave travel allowance tax exemption?

  • ·        Actual travel costs
  • ·        Allowance given by the employer.
  • ·        Whichever is less among the above two
  • ·        Allowance given by the employer in excess of actual costs is taxable.

Number of children allowed:

As per LTA rules, only 2 children born after October 1, 1988 are allowed for exemption. This rule does not apply for children born prior to October 1, 1988. It counts twins as “one child”.

Limits of actual travel costs:

Although the actual travel costs are exempted, those costs shall not be more than the following amounts.

Where Journey performed by air.

Economic airfare of national carrier by the shortest route.

Where journey performed by rail.

Fare of AC first class by shortest route.

Place of origin & destination are connected by rail but journey performed by other mode of transport.

Rail Fare of AC first class by shortest route.

Place of origin & destination are not connected by rail, but connected by other recognized public transport system.

First class fare or Deluxe class fare by shortest route.

Place of origin & destination are not connected by rail or any other recognized public transport system.

Rail Fare of AC first class by shortest route.

 
What are the limits on number of journeys?

LTA exemption can be availed for 2 journeys within a block period of 4 years subject to one journey in one year. The current block period is 2014-17.One of the unutilized journeys can be carried forwarded to the next block period, which has to be utilized in the first year of the next block period.

Conclusion:

Though the provisions and rules are clear about the Leave travel allowance. Many organizations have their own guidelines for Leave travel allowance. So, Leave travel allowance amount and Leave travel allowance eligibility depends upon the employee’s position in the organization, pay scale etc.